January 2015 series has proved to be a record breaking success story for the Indian equity market, when both Sensex and Nifty scaled Mt. Everest, the highest peak on earth. For statistical purpose the height of Mt. Everest has been recorded as 29029 feet (corresponding to 8848 meters) above Mean Sea Level (MSL). At the end of January series, Sensex and Nifty closed at records highs of 29682 and 8952 respectively, after conquering Mt. Everest. So, henceforth, our markets have leapfrogged into an uncharted territory where only sky is the limit. Let me admit, many of us including myself, never anticipated the ascent to Mt. Everest to be so fast and effortless as it turned out to be.
There are a few coincidences between the ascent to Mt. Everest and the ascent of our equity markets. The two base camps for climbers attempting to climb Mt. Everest are established at 17600 feet (5365 meters) in Nepal known as South base camp, and 16900 feet (5150 meters) in Tibet known as North base camp. Signs of animal life beyond 21000 feet (6300 meters) are very rare. Ascent above 26000 feet (7800 meters) is often referred to as 'Fatal Zone' as many climbers have perished at this height due to blizzards. We may note that Indian equity markets came close to levels of 21000 on Sensex (6300 on Nifty) at the fag end of the famous bull run that ended abruptly in January 2008. From these levels our markets slipped time and again to the levels of 16900-17600 on Sensex (5100-5300 on Nifty), making this as a strong base for the next bull run. We broke past the 'danger zone' of 26000 on Sensex (7800 on Nifty) after the installation of the new Govt. at the centre in May 2014. Since then it has been a relentless quest to conquer Mt. Everest, chanting the 'Modi Mantra', which our markets have successfully achieved in January 2015. Where do we go from here?
It has been a vertical climb for our markets from 26000 on Sensex (7800 on Nifty), so these levels now become the new base camp in the current bull run. Life at the top of Mt. Everest is not going to be easy considering the hostile environment (a.k.a. global cues). But the trend of easy global liquidity may help sustain these levels till the presentation of a most anticipated Union Budget by the Modi govt. on 28th February 2015. RBI Governor Rajan may also lend a helping hand to the bulls by announcing another rate-cut. A word of caution: We may not forget that currently our markets have run ahead of time and a descent from these levels is inevitable when the euphoria subsides. Q3 results that have been declared so far do not present a very rosy scenario. The valuations of most front line companies are fairly high in comparison to their historic averages. Notwithstanding the fact that we are in the midst of a great bull run, we must not perch our aspirations too high to expose our portfolio to the risk of blizzards.
